Correlation Between GM and Wistron NeWeb

Can any of the company-specific risk be diversified away by investing in both GM and Wistron NeWeb at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GM and Wistron NeWeb into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and Wistron NeWeb Corp, you can compare the effects of market volatilities on GM and Wistron NeWeb and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GM with a short position of Wistron NeWeb. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Wistron NeWeb.

Diversification Opportunities for GM and Wistron NeWeb

-0.63

Correlation Coefficient

GM  Wistron NeWeb

Excellent diversification

The 3 months correlation between GM and Wistron is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Wistron NeWeb Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wistron NeWeb Corp and GM is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on General Motors are associated (or correlated) with Wistron NeWeb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wistron NeWeb Corp has no effect on the direction of GM i.e., GM and Wistron NeWeb go up and down completely randomly.

Pair Corralation between GM and Wistron NeWeb

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the Wistron NeWeb. In addition to that, GM is 1.04 times more volatile than Wistron NeWeb Corp. It trades about -0.01 of its total potential returns per unit of risk. Wistron NeWeb Corp is currently generating about 0.06 per unit of volatility. If you would invest  13,750  in Wistron NeWeb Corp on December 20, 2024 and sell it today you would earn a total of  850.00  from holding Wistron NeWeb Corp or generate 6.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.33%
Values	Daily Returns

General Motors  vs.  Wistron NeWeb Corp

General Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Wistron NeWeb Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wistron NeWeb Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Wistron NeWeb may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with GM and Wistron NeWeb

The main advantage of trading using opposite GM and Wistron NeWeb positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Wistron NeWeb can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Wistron NeWeb will offset losses from the drop in Wistron NeWeb's long position.

The idea behind General Motors and Wistron NeWeb Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..